Samsung Electronics Warning: Soaring Memory Prices Will Disrupt Smartphone and PC Shipments; Contract Manufacturing Business Expected to Turn Around and Become Profitable

Samsung Electronics stated on Wednesday that driven by the global artificial intelligence wave, chip demand is expected to remain strong this year, but rising memory chip prices may impact shipments of computers and mobile phones.

Vice Chairman and Co-CEO of Samsung Electronics, responsible for the chip business, Kyung Kye-hyun, said at the annual shareholders’ meeting, “Due to the growth in AI demand and the resulting ongoing shortage of memory supply, we expect the business environment to become more favorable,” “However, risks still exist, including uncertainties in the global macroeconomic environment, such as tariffs and the cost burden on finished goods businesses (including TVs, mobile phones, and home appliances).”

Strong demand for AI data center operations has caused a bottleneck in global semiconductor supply, limiting memory chip supplies for industries ranging from automotive and computers to smartphones.

Since the beginning of this year, Samsung’s stock price has soared to a record high, rising 62% since January, outperforming the 34% increase of the South Korean market index, delighting shareholders.

This performance is mainly attributed to the global memory chip shortage, which has allowed Samsung and its competitors (including SK Hynix and Micron) to significantly raise prices. These three companies dominate global memory chip production.

At last year’s shareholders’ meeting, Kyung Kye-hyun apologized for Samsung’s initial missed opportunity in the AI chip market, which had led to declines in stock price and profits; he worked hard to reassure frustrated shareholders at that time.

However, the situation has improved since then. After a sharp rise on Tuesday, Samsung’s stock price increased another 5.3% on Wednesday. Previously, NVIDIA CEO Jensen Huang stated that the Korean company is producing NVIDIA’s new AI chips.

Analysts say Huang’s comments have fueled market expectations for Samsung’s foundry division. This division produces logic chips for Tesla, Apple, and Samsung’s mobile division, and after years of billions of dollars in annual losses, it is expected to turn profitable as early as next year.

“The situation couldn’t be better,” shareholder Oh Bong-gyu said before Wednesday’s market rebound, “but I am a bit worried about Samsung’s labor unions and the burden they may place on management.”

As employees grow increasingly dissatisfied with wage gaps compared to major competitors, Samsung’s union has threatened to halt chip production, with members voting on a strike planned for May.

Kyung Kye-hyun admitted that due to low chip profits leading to reduced performance bonuses, Samsung has fallen behind competitors in wage competitiveness.

He stated, “However, as we have regained competitiveness in semiconductor products since last year, the distribution of performance bonuses has begun to recover, and we expect the wage competitiveness gap to narrow.”